Banco Santander which has vastly expanded its global retail presence in the wake of the financial crisis, suspended a Madrid-based analyst after US regulators charged him with trading on inside information related to a large takeover that the Spanish bank is helping to fund

According to the Securities and Exchange Commission, the suspended employee, Juan José Fernández García, allegedly made $576,000 in illegal profits by making a large bullish bet on Canadian fertiliser and feed company Potash Corp of Saskatchewan. After Fernández García, an analyst in Santander's European equity derivatives research division, made the bet, Anglo-Australian mining company BHP Billiton made a $38.6bn (€30.4bn) offer for Potash on August 17.

The SEC also said Luis Martin Caro Sanchez, 36, a Madrid resident who doesn't work for Santander, allegedly made nearly $497,000 in illegal profits using the same trading pattern that Fernández García, also a Madrid resident, used during the same period.

The insider trading allegations at Santander, Europe's second largest bank by market value, come after the bank has made great strides toward becoming a stronger player in both retail and corporate banking, despite the travails of the battered Spanish economy. It has in recent months snapped up branches in the UK and is aiming to increase its US presence through a possible acquisition of Buffalo, NY-based M&T Bank.

Underscoring its corporate banking ambitions, Santander was among a group of banks that helped provide a $45bn loan facility to BHP to fund its offer for Potash, which was turned down. BHP has since made a "hostile" bid for Potash, appealing directly to shareholders to approve the deal. A BHP spokesman in London had no comment on the SEC action.

The SEC filed civil charges against Fernández García and Caro Sanchez and obtained a court order to freeze $1.1m of their assets, after Caro Sanchez tried to transfer some of the profits out of the US. It is an unusual action since all the players are outside the US, including the two companies engaged in the deal. The trades made by the accused, however, went through the Chicago Board Options Exchange.

Spain's financial authorities haven't been contacted, as no Spanish securities were involved, the SEC said.

"By virtue of his employment at the bank, he [Fernández García] would have access to information or people who knew about this deal," said Daniel Hawke, the SEC's market abuse unit chief, in a phone interview.

If found guilty, Fernández García and Caro Sanchez could face as much as a combined $3.3m in fines, on top of the confiscation of the trading profits.

The SEC's allegations have rattled Spain, where high profile insider trading cases are unusual since disclosure of such probes is limited. It also surprised some analysts and financial regulations lawyers that Fernández García, whose résumé shows more than a decade of industry experience, would undertake a trade that could easily arouse SEC suspicion.

The complaint "is not an indication of anything widespread at the bank, but it's embarrassing," said Daragh Quinn, a banks analyst with Nomura in Madrid.

The allegations are also potentially damaging if the information on the BHP offer is found to have come from another team at the bank, indicating a breakdown between the "Chinese wall" that banks are supposed to maintain between divisions, to avoid leaks of sensitive information.

Santander said it will cooperate with the SEC and is conducting its own internal probe.

"The bank has acted at all times following the appropriate procedures," Santander said in a statement yesterday.

According to the SEC, Fernández García and Caro Sanchez allegedly spent a combined $61,000 to purchase hundreds of option contracts for stock in Potash in the days leading up to BHP's bid. The two men bought the options, even though they were set to expire a short time later, the complaint said. In addition, the options weren't valuable unless the share price of Potash rose significantly.

The market for buying and selling stock options can be prone to inside trading abuse, option market experts say, because relatively small financial bets have the potential for big payoffs in the event of takeover or other announcements that cause a big swing in a company's share price. The men's trade was likely noticed because of the size of the profits realized, people familiar with SEC regulatory procedures said.

Fernández García has worked for Santander for the past five years. His profile, posted on the networking site LinkedIn, and the SEC complaint both said he is head of European equity derivative research, although a Santander spokeswoman wouldn't confirm his title. Notes published by him in recent years carried titles such as "Into the mind of derivatives," or "Equities are from Mars and derivatives are from Venus."

The complaint shows "that the SEC's prevention systems are very effective," said Juan Carlos Ureta, president of the Spanish Institute of Financial Analysts. "So-called Chinese walls can't fully prevent information leaks; you can lower risks, but overall compliance systems can't be put into question because of that."

Although insider trading cases in Spain are rarer than those in the US, a few cases have attracted national attention recently.

A Spanish court last year dismissed charges of insider trading against Cesar Alierta, the chairman of telecommunications giant Telefónica, citing Spain's statute of limitations laws.

The court, however, said Alierta used insider information to enrich himself. Prosecutors have appealed the dismissal, while Alierta's legal team is appealing on grounds that the court's ruling was harmful to him and violated his constitutional rights.

Write to Santiago Peréz at santiago.perez@dowjones.com

Pablo Dominguez in Madrid and Brendan Conway in New York contributed to this article.